As fears grow of a recession in the United States, investors are pinning their hopes on China. Many think the mainland's economy has developed sufficiently to allow its growth to 'decouple' from slowing US demand.

Asia's dramatic export-driven rebound from the savage economic crisis of 1997-98 is now deeply vulnerable to a synchronised global slowdown. Purged of financial excess and returned to business basics, a flawed but encouraging turn-around strategy appears to hang in the balance.

It is now conceivably just possible that the bottom of Asia's worst export slump in many years has been reached at last.

Exports across the region, including Japan, for the last six months of last year were down 6.5 per cent in US dollar terms but on this six-month average basis the worst point was October, with an 8.5 per cent decline.

Northwestern Xinjiang province plans to use US$168 million in overseas investment this year. Investment includes $128 million in overseas loans and $40 million in direct foreign investment, 33 per cent more than last year. Xinjiang reported a combined import and export volume of $6.2 billion in the past five years, with imports growing an average 6.9 per cent each year to $3 billion.

The history of the post-Cold War era has been the triumph of economic institutions over political ones. So it is that we place huge trust in the ability of central bankers and finance ministers to deliver us from economic strife.

Asia, once the darling of emerging markets, now knows what it is like to suffer at the hands of fickle private investors.

The huge capital outflows, and the harsh judgments that have been made by the market since last October, are still being felt, and estimates over how much less a factor private investment is going to play in the coming year are already beginning to abound.

Hong Kong had a visible trade deficit of $17.5 billion in May, up on $12 billion in May last year but slightly lower than the $18.1 billion seen in April. There was a 0.8 per cent drop in total exports to $117 billion, after a 4.5 per cent fall in domestic exports to $16.8 billion and a marginal drop in re-exports to $100.2 billion. Imports rose 3.5 per cent to $134.5 billion.

AMERICA'S frustration with Japan's restricted import markets is understandable. Year after year, United States and Japanese officials have negotiated and blustered, appeared to reach limited agreements on market-opening measures and then found themselves back at their talks as Japan's trade surplus has continued to grow.